Jet.com’s Strategy: Low Prices, Fast Delivery, Happy Workers

The Jet.com warehouse in Swedesboro, N.J. The start-up is trying to become a major force in the $350 billion e-commerce market in the United States.Credit
Cole Wilson for The New York Times

You can’t accuse Jet.com of timidity.

The start-up is making an audacious bet to establish itself as a major force in the $350 billion United States e-commerce market. To succeed, Jet must offer good selection, low prices and fast delivery — all the things online buyers demand yet few retailers can provide. The graveyard of e-commerce hopefuls is crowded. If Jet stumbles it will end up like the flash-sales site Fab, which burned through $325 million before being sold for less than a tenth of that early this year.

Jet has had some bumps and turns since last summer, when it began selling products as varied as cans of chili, exercise bikes and WowWee personal robots. It changed its business model, dropping a membership fee. It is burning through cash as it continues to scale up, now with more than 900 employees. When it went out to raise more money in the fall, it encountered skepticism. A week before Christmas, it told some customers they would not get their orders in time. Jet said only about 500 shipments out of a million were affected, but such admissions never look good.

Yet Marc Lore, Jet’s founder and chief executive, says he is not worried. What will separate Jet from Fab and every other failed company, he says, is happiness. In particular, employee happiness.

“I’m constantly asking people at Jet if they’re happy,” he said. “It’s really important for me to know that they love working here and think this is the best place they’ve ever worked.”

Jet supplies its employees with typical start-up perks like free food (weekly lunches, plus Red Bull in the refrigerator and protein powder in the kitchen cabinet), four months of paid parental leave, unlimited vacation and an ownership stake that could one day be worth a lot. But it also has some decidedly less common policies, like standardized, no-negotiation pay packages and worker-friendly employment agreements. Employees can see, every day, how the business is doing.

“Transparency” is a big word with Mr. Lore. So is “fairness.” Make people feel good, he says, and they will do their best. Trust them and they will reward you.

Other executives have the same idea, even if they do not quite express it in those terms. As the start-up scene moves from hot to lukewarm, there is a dawning sense that new companies need to think about the long term even as they are still struggling to establish themselves.

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Workers at Jet’s warehouse. On an internal survey, one anonymous warehouse employee wrote, “I can finally wake up & not say in my head ‘ughhh another work day.’”

Credit
Cole Wilson for The New York Times

“Many Silicon Valley companies are built on a culture of momentum, which can mask a lot of troubles,” said Michael Fertik, founder of Reputation.com, a reputation management company that started in 2006. “Then, when the momentum slows, the company is much larger, and the original mission, the original culture, has been diluted. Employees are no longer sure they are working for a place that works for them.”

The solution championed by Mr. Fertik and others is creating “a durable culture.” That task often falls to someone called the chief people officer, usually working directly with the chief executive.

The tools of the chief people officer are not necessarily better benefits or even raises. “We don’t simply want to console people with money,” explained Deena Gianoncelli, Jet’s chief people officer.

Money still drives the culture, however. And there has never been more money at stake than now. The number of unicorns — start-ups that are worth more than a billion dollars, a list that includes Jet — has more than tripled in the last two years, according to CB Insights, a research company. Converting these hundreds of billions in paper wealth into something of permanent value is a task, some argue, that will demand everything the employees can give, and perhaps more.

“Leading a start-up is a brutal pursuit,” Jason Calacanis, an entrepreneur and investor, wrote recently on his blog. “Most days are a death march in which you work horrific hours under massive duress waiting for your chance … to join the 80% of start-ups that die off.”

Dustin Moskovitz, a co-founder of Facebook and now chief executive of a start-up called Asana, says that attitude is counterproductive. He says he would have been a more effective leader at Facebook if he had gotten more rest and taken better care of himself.

“It is with deep sadness that I observe the current culture of intensity in the tech industry,” Mr. Moskovitz wrote on Medium. “My intellectual conclusion is that these companies are both destroying the personal lives of their employees and getting nothing in return.”

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By its logic, Jet.com has a chance to thrive in the long term only if it has the smartest and most motivated employees.Credit
Cole Wilson for The New York Times

Content Equals Committed

As the holiday shopping season was beginning in late November, Mr. Lore convened his top executives in Jet’s Hoboken, N.J., headquarters for their regular weekly meeting. Here are some of the things that were not on the agenda: warehouse logistics, customer concerns, fine-tuning prices, potential shipping bottlenecks, supplier issues or any of a dozen other topics that could have bedeviled Jet’s first December.

Instead, the executives discussed the mood and well-being of Jet’s employees.

The preliminary results of Jet’s first “Happiness Pulse” were in. More than 500 employees responded to the survey, which means basically everyone who had been at Jet for at least a month. Two-thirds of them said they viewed Jet favorably. Only 4 percent had a negative opinion.

“So only 25 people are basically unhappy,” Mr. Lore said.

“We have an opportunity to keep pushing these people into the ‘favorable’ bucket,” Ms. Gianoncelli said.

The executives chewed over the results in individual categories, which were presented by the survey company as scores: Jet got an 87 out of 100 as a company the employees would recommend as a great place to work, a 90 for letting people feel their work was important, and 87 for its managers. The results included not just the engineers and executives in Hoboken, but also packers in Jet’s three warehouses and the customer service people in Salt Lake City.

“These are not numbers you would expect out of an hourly work force,” said Nate Faust, the chief operating officer. Warehouse workers, who start at $13 an hour plus stock options, said things like this: “I can finally wake up & not say in my head ‘ughhh another work day.’”

The conversation briefly spun off into a discussion about the nature of happiness. Do people compare their happiness to an absolute, or is it relative? Can someone be somewhat dissatisfied and yet appreciate this might be as good as it is going to get?

Beyond the scores, the survey generated about a thousand anonymous comments. They were generally favorable but included qualms and complaints, suggesting that pervasive workplace happiness was an elusive or perhaps impossible ideal.

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In a survey, most Jet workers said they would highly recommend the company as an employer.Credit
Cole Wilson for The New York Times

“I feel empowered to make decisions. But my boss and 20 other people are empowered to overrule them,” one worker wrote. Another said, “I would recommend Jet as a great place to work ... only to those who thrive in unstructured environments.”

A third worker, however, was enthusiastic: “Companies over the years have lost the management/employee connection to the point where base-level positions are extremely dispensable. With Jet however that does not seem to be the case.”

Jet’s worst overall score was for work-life balance. It got a 69, which was only one point above the survey company’s benchmark.

“You always get slammed on that,” Mr. Lore said, referring to the inherent contradiction of trying to do something worthwhile that is all-consuming while holding on to the rest of life. One employee caught some of this tension when he commented in his survey response that working at Jet has been the best 14 months of his career, but not the happiest.

Mr. Lore still hopes to achieve happiness for all. It is the right thing to do, he says. But it is also a business strategy

“Miserable workers will still clock in if the pay advantage of a company is sufficiently great,” said Andrew Oswald, an economist at the University of Warwick in Britain who has studied workplace happiness for decades. “However, there is growing evidence that there is a causal link between happiness at work and greater productivity at work.”

The Jet.com warehouse in Swedesboro, N.J. The company has had some bumps and turns since last summer, when it began selling products as varied as cans of chili, exercise bikes and personal robots.Credit
Cole Wilson for The New York Times

By Jet’s logic, it has a chance to thrive in the long term only if it has the smartest and most motivated employees — and if it can prevent them from fleeing at the first sign of trouble.

One way Jet hopes to encourage employees to stay is to make it very easy for them to leave.

Tech companies can be jealous masters. They worry so much about losing employees, particularly the crucial software engineers, that a decade ago Apple made anti-poaching deals with several competitors. The companies agreed not to solicit one another’s workers, which was illegal. The resulting class-action lawsuit by the aggrieved employees was settled for $415 million.

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Jet employees can quit today and go work for a competitor tomorrow and hire friends from Jet the day after. Jet has no clawback provision, in which signing bonuses or moving expenses must to be repaid if the worker quits before a certain date.

“Jet’s contract strongly signals that it has put thought into recruitment, retention and employee satisfaction, which in turn triggers motivation and performance,” said Orly Lobel, a professor of employment and labor law at the University of San Diego. “Even the more casual language used in some of the clauses, which is not typical for legal contracts, has the branding strategy of a good workplace that understands its human capital is the key to its success, and there has been thought put into how to convey that.”

And then there is transparency.

In an interview a few weeks after Jet’s official debut in July, Mr. Lore pulled out his phone and opened an app. It showed that Jet sold $667,200 in gross merchandise value in one day, up 89 percent in a month. Jet had 6,100 first-time buyers the previous day, and 7,800 orders. The company had $153 million in cash. The app is bulging with data, and it is available to investors and the salaried — but not the hourly — employees.

Some information is available even to casual visitors. Dominating one wall in the reception area in Hoboken is a board posting constant updates of the day’s sales by number and dollar volume. For technology companies, this is radical openness.

“The downside of transparency is that it invites people to sensationalize,” Mr. Lore said. “I’m sure we’ll get burned once in a while.” Jet’s warning to customers about the delayed holiday shipments might be a case in point. While the company said it was an industrywide problem, the news quickly rocketed around the Internet. (Jet said Wednesday that the majority of the 500 vulnerable shipments had been delivered.)

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A Jet employee. The company's chief executive says, “I’m constantly asking people at Jet if they’re happy.”Credit
Cole Wilson for The New York Times

Also radical is a practice to keep salaries the same for jobs grouped together, a process called “leveling.” This is meant to rule out the common ploy “I got a job offer, can you match it?” Extroverts who promote themselves and introverts who keep their heads down are paid the same for jobs of the same value to the company.

That kind of transparency in salaries might not appeal to everyone — especially competitive types who are attracted to the risk and energy of a start-up. It is also unclear how practical it is in the long term. But Mr. Lore says it is crucial to fairness.

The Schedule Squeeze

Mr. Lore is 44, bald, soft-spoken. In 2005, he was a founder of the site Diapers.com, which became an e-commerce success. He sold the company, then called Quidsi, to Amazon in 2010 for $545 million, after a brutal price war. Amazon continues to run it as a separate e-commerce site. Mr. Lore left Quidsi in 2013 and began Jet the next year. More than two dozen Quidsi employees have followed him to Jet.

While Mr. Lore is bland in his references to Amazon, the e-commerce kingpin that Jet is trying to compete with, he openly criticizes Wall Street, where he once worked.

“I saw that it didn’t matter how you treated people, you just paid them enough so you didn’t care if you burned them out, and then you got new people and burned them out,” he said. “It was an environment of very short-term thinking.”

Merry workers are not exactly skipping through the halls in much of corporate America. Gallup regularly measures engagement, which it defines as people having the opportunity to do what they do best, their development being encouraged and their opinions counted. About one-third of workers are considered engaged, a level that has been stalled for some time.

And yet the demands increase. Seventeen percent of workers told Gallup this year that they worked 60 hours or more a week, nearly double the 9 percent who said so in 2005.

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The company’s headquarters in Hoboken, N.J.Credit
Cole Wilson for The New York Times

“The social norm at every company is to be available 24 by 7,” says Caralyn Cooley, Jet’s vice president for talent operations. “My willingness to accept that made me very successful.”

Ms. Cooley rose through the ranks at Honeywell, PepsiCo and then, as a mother of twins, Amazon, where she managed dozens of human resources specialists.

Then came her breaking point, she said. Her husband, a teacher, usually picked up the children from day care. A few times her sister did. And then one day Ms. Cooley fetched them, and the day care employee called out to them, “Your aunt is here!” Ms. Cooley had to correct her, “No, I’m their mother.” When she got to her car she cried.

“That’s when I realized I was giving too much,” said Ms. Cooley, 36. She rearranged her schedule, picked up her children more often, and then switched to a new job at Amazon. At Jet, she starts early and usually gets home in time for dinner.

Leading a Shift

Maybe, like most start-ups, Jet will fail, and the energy and money spent developing an employee-focused culture will have been pointless. The company has had doubters in the news media, but it says it is doing well, with two million customers and, in mid-December, its first $2.5 million revenue day. “We think they are going to be a winner in the cost-conscious consumables market,” said Gene Munster, senior research analyst at Piper Jaffray.

Whatever its fate, Jet is anticipating a different era.

A few years ago, a miserable employee had to suffer in silence. Now, thanks to Facebook, the employer-rating site Glassdoor and other social media sites, a company’s culture is increasingly on display.

The view is often dismal: Deloitte Consulting said in its annual survey of workplace trends that half of workers would not recommend their employer.

All of this, in turn, leads to high turnover that hurts the bottom line. Some analysts now think that might be changing as the recession moves further into the past and hiring becomes more competitive.

“Eighteen months ago, we started to see a shift, where companies were focusing less on pure productivity and lean operations,” said Stacia Garr, a vice president at Deloitte. “They know the economy is improving, that employees have more options, and are devising strategies to engage and retain them.”

As Ms. Gianoncelli and Ms. Cooley try to create a durable culture for what may or may not be a durable company, sometimes the more important factor is not whether employees will stay, but whether they should be hired in the first place. Jet is hiring 50 people a week.

An analytics applicant came into Jet for an interview. In some ways he was a model candidate, smart and driven. But he did not score high in the “plays well with others” category. Asked to talk about a recent project in which he was a member of a team, he could not think of any. His prospects immediately diminished to zero.

“He could have fit in somewhere else,” Ms. Cooley said. But he was not for Jet.

A version of this article appears in print on December 27, 2015, on Page BU1 of the New York edition with the headline: That’s Life at a Start-Up. Order Reprints|Today's Paper|Subscribe